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Thomas Long, Course Instructor

Not exactly....but it sure seems like it. Sometime next week we may find out if there was indeed some central bank intervention that kicked off this big move but it does seem to have started in the equity markets and moved its way through all financial markets. So perhaps a German ban on short selling in certain situations was the start. Who knows? But the commodity markets also felt the pressure as the get out now and ask questions later sentiment moved its way around the world.

However, this 4-hour chart of the EUR/USD shows that the technical picture has not changed.

eurusd 052110

The fundamental picture of the EUR certainly has not changed. What has changed? Sentiment sure doesn't feel the same and being shell shocked by a market will do that almost every time.

Patience and discipline may be the two most rewarded traits in the field of speculation. Otherwise, let the other traders show their hand first before jumping into a trade. Assuming that we have witnessed a trend changing event does not pay proper respect to the strength of a trending move or to the power of a short covering rally. Assuming that nothing has changed is also premature and can be costly. The market will show its true intentions soon enough and we just have to be ready to accept reality instead of trying to predict the next move.

I think any trading today should be more short term in nature since the daily trend has minimal influence on this style of trading. But the real money will be with the next trending move and traders should watch out for hints on the sentiment of traders as the dust settles next week.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.